Common Stocks and Uncommon Profits

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Lately, I’ve been trying to perfect my investment strategy/discounted cash flow model. While reading Phil Fisher’s Common Stocks and Uncommon Profits, I came across this quote by his son (written in the intro):

“[Phil] was a growth stock investor. It was simply who he was. Still is. I was always a value guy. A different cat.”

Certainly not tooting his own horn, Phil’s son explains his own success:

“Who knew that I would later go on to found a large investment management firm, write my own books, and become the tenth longest-running columnist in Forbes magazine’s formidable seventy-nine-year history, spanning hundreds of columns over more than a decade…”

Now, how can someone who has done all of that, not know that growth and value are two parts of the same strategy? Growth is a component of value. If company ‘A’ is going to grow its cash flows 25% a year, then it’s a growth company. If it’s selling as though it’s only going to grow its cash flows at 5% a year, then it’s a great value. On the other hand, if it’s selling as though it’s going to grow its cash flows 50% a year, it’s still a growth company-but now it’s a crappy investment. Successful growth stock investing is the same as successful value investing.